Chinese banks heeded the government’s call to extend more credit to support the economy as they issued $237 billion (1.62 trillion yuan) in new loans in January, up a whopping 101% year-over-year, the People’s Bank of China said. The surge provides evidence that state-owned banks are heeding the government’s call to extend more credit to support the economy.

"The banks are fighting for the best projects in the government’s stimulus package,” Ha Jiming, chief economist of China International Capital Corp, told China Daily. "It’s not surprising to see that an array of the deals were sealed in the past month."

The massive jump in lending is equal to about one-third of the loans issued in all of 2008, prompting some economists to say the government might discontinue cutting interest rates.

"The bank lending figures are just a stunningly good piece of news for China," Glenn Maguire, chief Asian economist for Societe Generale in Hong Kong, told Reuters.

Now, it looks like the lending is spurring China’s turnaround. According to the median estimates of 14 economists in a survey released Friday by Bloomberg News, the world’s third-biggest economy will expand 6.6% in the second quarter after slowing to 6.3% in the first quarter.

That growth will accelerate to 7.2% for the full year, according to Wang Qian, an economist with JPMorgan Chase & Co. in Hong Kong. Stimulus spending will account for 3% of the total, she estimates.

"China looks set to be the first major economy to recover from the current global meltdown,” said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong told Bloomberg Asia. "China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008, when the financial crisis worsened to a near collapse.”

As Money Morning reported in its Outlook 2009 series, there is ample evidence that the stimulus will be large enough to assure China’s economy and markets will weather the storm and ultimately thrive in the year ahead.

The government announced the huge stimulus package on Nov. 9 to boost domestic demand and shore up investment. Though the central government will bear one-third of the cost, state-owned banks will play a critical role in financing the construction of bridges, railways and highways.

China is trying to recover from an economic slide that forced it to shed 20 million jobs, as exports dropped and the real estate market slumped. Spending on roads, railways and housing has increased prices for iron ore and other commodities, and helped drive the record number of new loans in January.

The lending multiplies the effect of the government’s spending in ways that wouldn’t be possible in the United States and Europe, where banks are burdened by toxic assets, Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong, told Bloomberg.

Stimulus projects are evident throughout the country. The building of public houses in Shaanxi province and Shanghai began in December, while Shandong province started work on three new railway lines the same month.